# 1-(Future values )For each of the cases shown in the following table,

1-(Future values )For each of the cases shown in the following table, calculate the future value of the single cash flow deposited today that will be available at the end of the deposit period if the interest is compounded annually at the rate specified over the given period.

Case Single cash flow Interest rate Deposit period (years)

A $ 200 5% 20

B 4,500 8 7

C 10,000 9 10

D 25,000 10 12

E 37,000 11 5

F 40,000 12 9

2-(Present values)For each of the cases shown in the following table, calculate the present value of the cash flow, discounting at the rate given and assuming that the cash flow is received at the end of the period noted.

Case Single cash flow Discount rate End of period (years)

A $ 7,000 12% 4

B 28,000 8 20

C 10,000 14 12

D 150,000 11 6

E 45,000 20 8

3-(Future value of an annuity)Future value of an annuity For each case in the accompanying table, answer the questions that follow.

Amount of Interest Deposit period

Case annuity rate (years)

A $ 2,500 8% 10

B 500 12 6

C 30,000 20 5

D 11,500 9 8

E 6,000 14 30

a. Calculate the future value of the annuity assuming that it is

(1) An ordinary annuity.

(2) An annuity due.

b. Compare your findings in parts a(1) and a(2). All else being identical, which type

of annuity—ordinary or annuity due—is preferable? Explain why.

4-(Present value of an annuity) Consider the following cases.

Case Amount of annuity Interest rate Period (years)

A $ 12,000 7% 3

B 55,000 12 15

C 700 20 9

D 140,000 5 7

E 22,500 10 5

5-(Bond valuation—Annual interest) Calculate the value of each of the bonds shown in the following table, all of which pay interest annually.

Bond Par value Coupon interest rate Years to maturity Required return

A $1,000 14% 20 12%

B 1,000 8 16 8

C 100 10 8 13

D 500 16 13 18

E 1,000 12 10 10

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